Broker snap: Killik bearish on Thomas Cook

30th Nov 2009 13:04

Travel operator Thomas Cook's full year results were ahead of expectations but broker Killik & Co still would not buy the shares, even though they look cheap.The shares trade on 8.4 times consensus earnings per share for the year to September 2010 and are 'not expensive at present,' concedes Killik's head of Equities, Jonathan Jackson. Jackson also observes that the group is likely to enjoy a reduction in fuel prices next year and will benefit from the elimination of competition such as XL Leisure Group.'However, we believe 2010 will be a difficult year for the consumer, with higher taxes and concerns over unemployment impacting levels of discretionary spending,' Jackson said. With the FIFA World Cup also likely to prove a disruptive influence, 'we think the environment for the industry will remain tough,' the broker concludes.Panmure Gordon disagrees with the bearish view, however, and recommends buying the shares 'given the compelling valuation and attractive risk/reward profile'. It has a 310p price target.